Black-Owned Banks Are Hanging On--But For How Long?

It is no secret that Black-owned banks have been suffering, but they do play a valuable role in the African-American community. Still, the debate goes on as to if they are still relevant.

John William Templeton, co-founder, National Black Business Month and chief economist, Ibis Partners, says Black-owned banks are needed today more than before as they are a vital resource for funding for African American businesses. “African-American banks are more important than ever because of the historic disinvestment by larger banks in small business lending--a drop of 75 percent in SBA loans to Black-owned businesses from 2008 to 2010, according to my annual State of Black Business report,” he explains.

Despite their importance, Black-owned banks are disappearing. According to HBCU Money, there are 21 African-American owned banks with assets totaling approximately $4.7 billion in assets. This is a drop from 1994, when there were 54 African-American owned banks, according to the FDIC.

Templeton feels Black-owned banks can turn this downward trend around. “It will require a change in focus towards lending to larger scale ventures, including some risk capital,” he observes. “I've presented a new approach to the leadership of the National Bankers Association, which identifies promising industries where African-Americans can build community anchor companies which change entire neighborhoods,” he says.

Templeton says the banks must be more pro-active. “The approach of waiting for individuals to come in with their own business plan in isolation of regional and local plans is not viable,” he points out, adding they must look to other avenues. “Contract financing is an increasingly important niche for banking with Black-owned businesses; they also have the advantage of utilizing their trust with consumers, given the way that bigger banks exploited asymmetric information during the mortgage meltdown,” he says.

The 10th anniversary of National Black Business Month will take place at Stanford University on August 17, 2013.

Among the Black-owned banks are:• Broadway Federal Bank FSB (Los Angeles, California) has been in business since 1947 and has assets of $385,055,000; • Carver State Bank (Savannah, Georgia), founded in 1927, has assets of $41,573,000; • Citizens Trust Bank (Atlanta, Georgia) was opened in 1921 and has assets of $392,286,000; • First State Bank (Danville, Virginia) was started in 1919. Today its assets are $38,882,000;• Illinois Service Federal Savings & Loan (Chicago, Illinois), launched in 1934 and has assets of $140,148,000; and • Mechanics & Farmers Bank (Durham, North Carolina), which opened in 1908 and has assets of $304,809,000.